Denis O’Brien deal a significant blow, capping years-long battle to manage Digicel debt

Denis O’Brien’s move to endorse a deal with Digicel bondholders that will see him lose control of the telecoms business he founded in 2001 is a significant blow, and caps a battle to manage the company’s debts that has been ongoing for a number of years.

In 2020 it moved to cut its then $7 billion (€6.6 billion) debt pile, and opened negotiations with bondholders. Those talks resulted in creditors taking a $1.6 billion haircut on their investment. In 2015 Digicel called off a planned IPO, citing market conditions. It had been expected use the proceeds of that to repay some of its debt.

Still, Digicel found itself back negotiating with bondholders again this year, as the company grappled with civil unrest in Haiti which decimated one of its most important markets, and had knock-on impacts on its debt. Digicel’s debt is mostly denominated in US dollars, yet it sales are in mostly local currencies of the various nations it operates in. Therefore if those currencies lose value against the dollar, that can further impair Digicel’s ability to pay down its debt.

[ Denis O'Brien set to lose control of Digicel in €1.8bn debt cut plan ]

While the final details of Wednesday’s deal remain unclear, Mr O’Brien will continue to play a significant role in Digicel. In many cases, when bondholders take over a business the previous owners or management team tend to be ushered to the exit quite quickly after.

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Digicel though is a sprawling, complex business. It spans 25 territories in the Caribbean and Central America, according to its website, with numerous business lines including mobile phone networks and broadband. In short, Mr O’Brien’s knowledge of the company will likely be hugely important to the new majority owners.

Mr O’Brien will “remain actively involved in the business as a director and retain an equity interest in the recapitalised business,” the company said in an emailed statement.

There is no clarity yet on what size of a stake Mr O’Brien will be left with in Digicel after this process has concluded, but it’s worth noting that convertible notes worth $190 million handed out to some investors as part of the 2020 debt restructuring could technically have been swapped by bondholders for a 46 per cent stake in the company from June. The latest deal, agreed in principle with a group of bondholders holding about half of Digicel’s debt, will see about $1.8 billion worth of debt written off.

Mr O’Brien extracted about $1.9 billion of dividends from Digicel from 2007 to 2015. Those days have been gone for a while and likely won’t return. At this point though, there is little indication that Wednesday’s deal will have any impact for Mr O’Brien beyond Digicel.